Column - Freeing W.Va.’s economy will make it more competitive
Published: Thursday, February 2, 2012
Updated: Friday, February 3, 2012 07:02
Few things are more vital to both individual and societal prosperity than economic liberty.
The freedom to pursue one's economic goals and to make uninhibited use of one's earned income is essential to the coordination of market phenomena and the production of widespread wealth.
Despite this commonly understood maxim, however, governments at every level of the American system regularly insist on steering the economy to suit their whims. From energy policy to health insurance to tax schemes, policymakers across the country always seem to believe they alone know what's best for their constituents. When those beliefs prevail, we all suffer.
West Virginia offers a telling tale of such public policy failures. According to the Fraser Institute's Economic Freedom of North America report, West Virginia has consistently ranked among the least-free states for the last three decades.
Forbes Magazine ranks West Virginia 43rd among the best states for business, largely thanks to a low supply of skilled labor and a nightmarish regulatory environment.
Unsurprisingly, the Mountain State is also among the nation's poorest, with a gross domestic product per capita of just more than $35,000. As numerous studies have shown, these two phenomena – economic freedom and economic prosperity – go hand in hand at the state level.
West Virginia's history of economic stagnation is largely the result of state policies that have strangled entrepreneurship and discouraged capital investment in a state that desperately needs both. For years, our corporate tax rate was one of the highest in the country.
Our regulatory system has grown to the point of micromanaging large and small businesses alike, and labor restrictions prevent the development of a competitive workforce. These and similarly ill-advised policies have combined to produce a statewide economic environment that falls far short of what West Virginians deserve.
Numerous state policies must be repealed or reworked to reverse this unacceptable trend. Fortunately, West Virginia's tax policies are improving. The state's corporate tax rate is scheduled to fall from 8.5 percent to 6.5 percent by 2014, and we currently rank 23rd in the Tax Foundation's State Business Tax Climate Index. Despite these encouraging signs, however, there is certainly room for improvement.
For example, West Virginia currently levies a personal property tax on businesses' inventories and equipment. A 1999 report by the Center for Business and Economic Research at Marshall University found repealing this tax is one of the most pro-growth measures legislators could take.
Our state would benefit even more from a number of other market-friendly reforms. According to Forbes, West Virginia has the second most anti-business regulatory environment in the country. This unfortunate fact is the product of well-intentioned policies that pile up over time to produce a system full of red tape and unintended consequences.
To improve the Mountain State's business environment, all existing economic regulations ought to undergo a mandatory cost-benefit analysis that accounts not only for direct costs but also secondary costs and unforeseen consequences. In the future, all newly proposed regulations ought to be subjected to similar analysis. These measures would surely ease West Virginia's burdensome regulatory environment and produce more sensible state policies.
Finally, passing Right to Work legislation would provide a considerable boost to employment in West Virginia. This legislation, currently in place in 23 states, protects workers from compulsory unionization in their line of work.
Since at least 2003, Right to Work states have consistently posted lower unemployment rates than other states. Though the difference is modest in percentage terms (about 0.5 percent), this could provide job opportunities to thousands of unemployed West Virginians. More importantly, a Right to Work law would make West Virginia a much more attractive state for businesses, especially compared to our neighbors Ohio, Pennsylvania, Kentucky and Maryland – none of which are Right to Work states.
These relatively modest proposals would do wonders for West Virginia's traditionally underwhelming economic growth.
More importantly, they would infuse a great deal of truth into our state motto's proud proclamation: Montani semper liberi – Mountaineers are always free.